A screen grab from the Panorama programme that exposed systematic abuse at a unit for people with learning disabilities. Downing Street has demanded a full report following the disclosures. Photograph: BBC/PA

Downing Street moved to prevent a collapse of public confidence in the care of Britain's most vulnerable citizens amid fears about the solvency of the country's biggest residential home operator for the elderly and widespread horror at revelations of abuse in a private facility for people with learning disabilities.

Ministers abandoned their insistence that these were local issues by announcing a "guarantee" that 31,000 elderly residents of the care home chain Southern Cross would be found alternative accommodation if the company went under.

The prime minister's official spokesman said Downing Street was in touch with Southern Cross. "Our role is to ensure we keep in close contact with what is going on and keep monitoring the situation. We will do what we can to ensure there is protection for anyone affected by this."

The move amounted to an effective repudiation of the government's commitment to localism.

Local authority leaders, who had been told the Southern Cross problem was a contractual issue for them to resolve, were unaware of the nature of the guarantee, but they issued their own assurance that all the company's residents – including those who pay their own care fees – would be looked after.

Meanwhile, No 10 has demanded a full report following the disclosure by the BBC Panorama programme of systematic abuse at a unit for people with learning disabilities near Bristol run by the Castlebeck company, a firm ultimately owned by Irish tycoons JP McManus, John Magnier and Dermot Desmond.

The Department of Health had been insisting behind the scenes that it was an issue purely for the Care Quality Commission (CQC), the care sector regulator, and the local authorities and NHS primary care trusts that paid the £3,500-a-week fees for the young adults they referred there.

But the health department found itself obliged to step in. No 10 has asked for a detailed account of what the various agencies knew and did about the regime at the unit. The CQC, which failed to follow up tip-offs from a whistleblower who then contacted Panorama, has admitted its mistakes were "unforgivable".

For ministers, there were unnerving signs that controversy over social care was seamlessly taking over from controversy over the government's becalmed NHS shakeup, now that its "listening exercise" on complaints about the reforms has concluded pending a report. The clear link between the two in the public eye is that the NHS plans include outsourcing NHS care to "any qualified provider".

The health secretary, Andrew Lansley, who has been under increasing pressure over his NHS bill, said today he was ready to accept "substantial and significant" changes to his NHS plans. He wrote in the Daily Telegraph that sticking with the status quo was "not an option" and, without change, the NHS faced "enormous financial pressures" due to an ageing population and rising treatment costs which will undermine the health service.

"We have always been clear that we are ready to accept any changes – substantial and significant – if they help us improve care for patients," he wrote. "When the health and social care bill comes back to parliament, people should have every confidence that we will make the changes necessary to ensure the NHS is protected for our future generations.

"We will never privatise our NHS. But if we choose to ignore the pressures on it, the health service will face a financial crisis within a matter of years that will threaten the very values we hold so dear – of a comprehensive health service, available to all, free at the point of use and based on need and not the ability to pay. I will not allow that to happen."

Stephen Dorrell, the former Tory health secretary who chairs the Commons health select committee, outlined arrangements for a wide-ranging inquiry by his committee in the autumn.

He said the inquiry would look broadly at the process of commissioning care and support for vulnerable adults, following a report due next month from a government commission on the funding of social care, led by the economist Andrew Dilnot.

"The questions will be about how can these stories of abuse arise," Dorrell said. "There was Panorama yesterday, but also the report last week on care of the elderly in NHS hospitals, all the issues around Southern Cross and the CQC in particular.

"We are talking about 70% of patient load of the health service, that is people with long-term needs and conditions, and so often we focus on waiting times for elective operations. This is a far bigger issue."

Referring to the Castlebeck case, Dorrell said: "Someone had to sign the cheque that the care home operator was being paid to provide a service of £3,000 per week. I presume the majority of those cases were paid for with public funds. The people who signed the cheque have a duty to make certain that standards are of an adequate nature."

The Department of Health said last night: "No one will find themselves out on the street – we will not let that happen. We are ensuring, through our discussions with Southern Cross, landlords, banks and others, that everyone involved understands their collective responsibility towards the residents and works together to support the plans set out by Southern Cross. All parties involved - including other government departments and local authorities - are ready to take decisive action, if the current plans do not create a viable platform for the future."